Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

Why Baidu Missed the Dow's Rally

A brief look at today's losers.

Recently, when it comes to the stock market, what comes down must go back up. Stocks managed to erase much of their losses from Monday's session as positive earnings announcements helped investors get back a bit of their optimism about the market. Although the Dow Jones Industrials (DJINDICES:^DJI) finished well off their highs and didn't manage to close above the 14,000 level, they nevertheless notched a nearly 100-point gain. All but two Dow components rose.

One of those two Dow losers was IBM (NYSE:IBM), which fell more than half a percent. The company tapped the credit markets for $2 billion in floating-rate debt, which is a somewhat questionable move given that rates on fixed debt are still at incredibly low levels. Yet with the opportunity to pay less than the prevailing LIBOR rate on its two-year notes, IBM likely believes that rates will stay low long enough to avoid too much risk. Another possible reason for the drop was Oracle's (NYSE:ORCL) purchase of Acme Packet, in which Oracle hopes to mimic IBM's strategy of being a one-stop shop for information technology. That's a threat to IBM, and the fight is only likely to get tougher as more players try to follow the same game plan.

Baidu (NASDAQ:BIDU), though, saw much bigger declines, falling more than 10% after announcing earnings that had disappointingly slow growth. Given that the Chinese Internet search giant has grown at such a strong clip for so long, guidance for the first quarter that fell short of analysts' consensus figures was enough to scare shareholders into selling. Eventually, Baidu will mature and see growth slow, but despite rising competition, it maintains a strong hold on its home market and has had a track record of quashing competitive pressures in the past.

Finally, NII Holdings (NASDAQ:NIHD) fell more than 8%. The company, which focuses on the Latin American telecom market, projected 2013 revenue that fell well short of what Wall Street expected. With slow subscriber growth and plans to raise further debt, the company isn't holding up well in a highly competitive market that includes some of the strongest players in Latin American telecom.

Author

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.
Follow @DanCaplinger